Dear Penny: I’m No Longer Dead Broke, So Why Am I So Scared to Buy a Home?

I’m not sure if I need money advice or a therapist, but here goes: How do you know when you have enough money to spend it? Or rather, when do you know you’re making the right decision about a major purchase?

Background: My family didn’t talk about money when I was growing up and punished me when I tried to find out things like how much we paid for our houses and how to do taxes. They swore they would pay for my college, but reneged and refused to fill the FAFSA out. I took out loans but no other debt, got married and graduated.

We started our careers during the recession with hundreds of thousands of dollars of college debt. He had credit card debt from a medical expense. We took low-paying, terrible, soul-killing jobs. We lived in a crumbling basement apartment with black mold where the previous tenant was a meth dealer.

It was a lot of staring at the wall not talking at night because we didn’t know how we would get out of debt and insensitive remarks from our parents and older relatives about our laziness and money management skills.

We’re not there anymore. We got a couple lucky breaks, the economy recovered and we are now establishing ourselves in solidly middle class careers.

We’ve paid all debts except for the student loans and are on track for paying them off next year. We set up retirement accounts, and we have an emergency fund.

I got a $60,000 inheritance from my dad. We haven’t used any of the money, but having that in a high-yield savings account let us feel comfortable to dedicate 70% of our incomes to paying off those debts.

Now we’re looking for a house, and I don’t know if we’re making the right decision. We don’t live in the black-mold meth apartment anymore, but our new neighbors smoke and the smoke is getting in our apartment.

Online advice says we should be able to afford a house. Since we intend to stay here for the rest of our lives, it makes more sense to purchase rather than deal with rent increases every year. But houses always come with more expenses than you think, and we would have to spend that money for the down payment.

Do I bite the bullet and spend the money, or put up with the annoying neighbor and rent increases but keep a solid emergency fund?

I really don’t want to go back to staring at the wall at night.

-C.

Dear C.,

I only want you staring at the wall at night if you’re contemplating paint choices for your new home.

It sounds like your gut is telling you that buying a home is right for you in the long term. Unfortunately, even the right decision doesn’t mean you’ll never have another anxiety-induced stare-in-silence-at-the-wall kind of night. Expensive repairs, job losses, market downturns can always happen.

No matter how prepared you are, these events won’t be pleasant, though a decent emergency fund can ease the stress. So will having as little debt as possible.

So I think there’s a pretty simple solution to your homebuying quandary: Wait until next year when you’ve paid off your debt. Keep the $60,000 in liquid savings.

Once you’re ready to buy, you probably won’t need to drain the full $60,000 from your savings. The median down payment for first-time homebuyers is just 6%, according to the National Association of Realtors.

In the meantime, try having a friendly chat with your neighbor to let them know the smoke is impacting you. If they’re not willing to work out a solution, like smoking outside, go to your landlord. They often have wide discretion to restrict indoor smoking.

Holding off has an obvious benefit: You’ll be better prepared for those expected-yet-unexpected homeownership costs with the other 70% of your income freed up.

While you crush the last of that debt, consider meeting with a financial planner to figure out how much house you can afford. Crafting a plan with help from a professional will make this decision a lot less scary.

There’s also a less obvious benefit to paying off your debt before buying a home: the confidence boost.

Your early experiences with money were negative. But paying off debt is a huge win. You’ll have evidence that the tough times didn’t define you.

You’ll know that not only are the black mold meth apartment days behind you — but so is the debt you carried over from that chapter.

Robin Hartill is a senior editor at The Penny Hoarder and the voice behind Dear Penny. Send your questions about homebuying to [email protected]